Bank of England makes biggest rate hike in 27 years, warns of recession until 2024

The British pound sterling fell as the Bank of England said Britain would enter a recession at the end of 2022 and not emerge until early 2024.

The Bank of England raised interest rates in the biggest hike in 27 years on Thursday in an attempt to smother surging inflation on track to top 13 per cent, even as it warned a long recession is coming.

Reeling from a surge in energy prices after Russia’s invasion of Ukraine, the Bank of England’s rate-setters voted 8-1 for a half percentage-point rise in bank rate to 1.75 per cent.

The big hike had been expected by most economists in a Reuters poll as central banks around the world scramble to contain soaring prices.

The British pound sterling fell as the Bank of England said Britain would enter a recession at the end of 2022 and not emerge until early 2024.

Governor Andrew Bailey said economic uncertainty was exceptionally large and that all options are open.

“Returning inflation to the two per cent target remains our absolute priority,” he said. “There are no ifs or buts about that.”

As well as surging energy costs, Britain is also adjusting to Brexit and a political leadership change.

The Bank said Britain was facing its biggest slump in living standards since records began in the 1960s.